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June 12, 2022 – Electric vehicle start-up Electric Last Mile Solutions Inc (Nasdaq: ELMS; "ELMS" or the "Company") has announced that it intends to file for Chapter 7 (ie liquidation) relief in Delaware; noting that its efforts to address "legacy financial, governance and operational matters" had come up short.
Remaining Board members Shauna F. McIntyre, Brian M. Krzanich and Richard N. Peretz have each tendered resignation "to become effective upon such time as a Chapter 7 trustee is authorized to assume control of the Company’s affairs."
At the end of January, ELMS announced that based on a "Special Committee investigation…the Board concluded that the previously issued consolidated financial statements of Electric Last Mile, Inc. as of December 31, 2020 and the period from August 20, 2020 (inception) through December 31, 2020 included in the Company’s Registration Statement on Form S-1 (File No. 333-258146) (the “Audited Financial Statements”) should be restated and, therefore, should no longer be relied upon." Ditto for its 10-Qs filed in respect of the second and third quarters of 2021. Also announced at the time were the impending February 1st departures of Mr. Luo, ELMS's Executive Chairman, and Mr. Taylor, ELMS's President and Chief Executive Officer.
Things did not get better. On May 27th, the Company announced that without obtaining additional financing, it has sufficient cash to continue operations into June 2022….The Company is actively pursuing potential sources of liquidity and is working to extend its cash runway during this process to the extent possible."
The electric wheels have not so silently fallen off of the SPAC start-up, which had gone public in December 2020 and trumpeted an "implied equity value of the combined company [of] approximately $1.4 billion," with $379.0mn of gross proceeds apparently enough to "sufficiently fund initial product launches."
Amongst other optimistic statements at the time that will be drawing scrutiny from the SEC (the Company informed of an SEC investigation on March 7th) will be the Company's highlighting of "verified customer demand with more than 30,000 pre-orders representing over $1.0 billion of anticipated revenue."
Chapter 7 Liquidation
In a press release (8-K here) announcing the its intention to pursue a Plan of liquidation, the Company noted: "…Based on the findings of the same Board-initiated investigation that led to the resignations of Mr. Taylor and Mr. Luo, ELMS was forced to withdraw financial guidance and declare the Company's past financial statements unreliable. The compound effect of these events, along with a pending SEC investigation initiated this year, made it extremely challenging to secure a new auditor and attract additional funding.
Yet the Company continued to work aggressively on raising new sources of capital, while working closely with advisors to assess and improve its liquidity position. Ultimately, the Board determined, following a comprehensive review with the assistance of the Company's outside advisors, and upon the recommendation of the Company's management, that it is in the best interest of the Company and the Company's stockholders, stakeholders, creditors, and other interested parties to file for Chapter 7 relief.”
The Debtors’ interim CEO and President Shauna McIntyre commented: “Unfortunately, there were too many obstacles for us to overcome in the short amount of time available to us;“ with Board Chair Brian Krzanich adding: "For the past several months, the ELMS board and the new ELMS leadership team have worked nonstop to address legacy financial, governance and operational matters at the Company, and enormous progress was made, including towards vehicle certification. Therefore, it’s extremely frustrating that we must take this route, but it was the only responsible next step for our shareholders, partners, creditors, and employees.”
About the Debtors
According to the Debtors: “Electric Last Mile Solutions, Inc. (Nasdaq: ELMS) has been focused on defining a new era in which commercial vehicles run clean as connected and customized solutions that make businesses more efficient and profitable. ELMS’ first vehicle, the Urban Delivery, was anticipated to be the first Class 1 commercial electric vehicle in the U.S. market."
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